FASB has issued an accounting standards update (ASU) focused on bringing consistency to financial statements of newly formed joint ventures.
The ASU noted that GAAP doesn’t provide “specific authoritative guidance on how a joint venture, upon formation, should recognize and initially measure assets contributed and liabilities assumed (including the assets and liabilities of businesses contributed).”
The amendments set out to provide decision-useful information to investors and other allocators of capital (collectively, investors) in a joint venture’s financial statements. The amendments also aim to reduce diversity in practice.
The amendments are effective prospectively for all joint ventures with a formation date on or after Jan. 1, 2025. Read more.